Athenahealth CEO Jonathan Bush Resigns: Avoiding a Similar Fate

Jonathan Bush Resigned as CEO of Athenahealth after dealing with activist investors

One of the strangest CEO sagas of the year came to an end this week when Jonathan Bush, cousin to George W. Bush and nephew to George H.W. Bush, announced his resignation as the chief executive of Athenahealth, the Watertown, Mass.-based health software firm.

Bush founded the company with Todd Park (who later went on to become chief technology officer of the United States in the Obama administration) in 1997 and oversaw its growth from a small startup to a health IT giant with a market cap of more than $6 billion. The colorful Bush was the definitive face of the company, a consistent keynote presence at industry conferences and frequently outspoken about the country’s broken healthcare system.

His downfall began in May 2017, when activist investor, Elliot Management—led by Paul Singer—took a 9.2 percent stake in Athenahealth. Singer is notorious for buying into companies, shaking up management, and selling them. His investment into Athenahealth prompted the Board of Directors to make an initial change in management in August of last year, with Bush relinquishing his role as Chairman and President, but staying on as CEO.

While the company saw year-over-year revenue growth, its financial troubles (bookings were down 15 percent year-over-year) led to a 9-percent reduction in staff in October. Moreover, in February, Athenahealth welcomed former GE CEO Jeff Immelt to the board as its new Chairman. The moves were not enough to quiet the complaints from Singer’s Elliot Management, and in May of this year, the firm offered to buy Athenahealth outright for $6.9 billion or $160 per share, citing the need for operational and management changes.

With the reports piling up, Bush resigned as CEO of Athenahealth earlier this week. Immelt was named Executive Chairman and CFO Mark Levine will take more control over day-to-day operations, as Athenahealth reviews its options for a sale.

Same Old Story

Many CEOs may wonder how a successful, charismatic personality like Bush found himself pushed out the door and what they can do to avoid a similar fate. We spoke to leadership experts who say it’s not that uncommon. Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management told Chief Executive he has seen this story before, citing Arconic’s recent showdown with Singer that cost CEO Klaus Kleinfeld his job.

“This same activist group found their inferior takeover offer rejected and then suspiciously, an unending campaign of misleading, wilting character attacks was unleashed with a series of stories unfairly attacking the character of the CEO.”

In both cases, Sonnenfeld says the boards didn’t have the fortitude to stand up to the attacks. David E. Williams, president, Health Business Group in Boston, similarly seen this scenario play out before where a founding CEO is ousted by investors.

“It actually usually happens at an earlier stage than what you’re seeing here. What’s so noticeable here is that [the CEO] has been involved with the company for a long time and is a large publicly-traded company,” Williams says.

Next page: An Athenahealth institutional investor explains why he never lost faith in Jonathan Bush

CEO CONFIDENCE INDEX

Chief Executive’s most recent reading of CEO confidence in future business conditions slipped from 7 out of 10 in October to 6.9 in November. It was a new low for 2018 as business leaders begin to prepare for a possible downturn ahead.

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